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Methods of financing for renewable energy projects in the past have typically included combinations of equity, debt and tax-equity financing (used to monetize federal tax credits that the developer cannot use due to insufficient tax liability). Residential solar developers have also been able to use the securitization of power purchase agreements and lease agreements to rebuild their capital—for example, SolarCity recently bundled three pools of solar asset-backed leases, with its third pool raising more than $200,000,000.

Yieldcos allow utility-scale developers to replenish capital. The cash flows they generate are distributed to investors as dividends, and corporate level tax is shielded in whole or in part in a number of ways. They also tend to attract investors, such as tax-preferred pension plans, that may be tax indifferent. Jenner et al. discuss other funding options that behave like yieldcos, such as private equity funds, the use of cash-equity—investors taking a portion of the developer's remaining interest after tax equity is in place—and “private” yieldcos where no public stock offering is made.

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